College on a Dime: When picking a college, people don't think

AOL Money & Finance writer and editor Zac Bissonnette is a sophomore at the University of Massachusetts Amherst, and an expert on getting a great education without going broke.

When it comes to picking a college, people don't pay much attention to the costs.

That's the outcome of a new study commissioned by Fannie Mae. Some nuggets: 40% of families don't limit their college search based on costs and middle-class families are pretty much just as likely to splurge for a pricey private college as wealthy ones (20% vs. 22%).

Commenting on the study, financial planner Fredrick Adkins told The Associated Press that picking a college is largely an emotional decision but that "At some point, if it's going to totally put a family's finances in jeopardy, rationality needs to factor in."

That's true, but it's also woefully inadequate: kind of like saying that if you're driving so fast that an accident is nearly a certainty, it might be time to consider slowing down. If you're like most people, college is one of the biggest investments you will ever make and you simply do not have the luxury of making an irrational decision about it.

One of the problems that people face in making a rational decision about college is the lack of objective information. Think about it: your high school guidance counselor will look good for getting students into expensive name-brand private colleges. The college's financial aid office wants your kid to go there, so they'll suggest whatever it takes to make that happen, and lenders make money by lending money, preferably at a high interest rate. There is no one there who is truly looking out for you and your child's best long-term interests. To help you make a rational decision, here are some "family discussion" questions to ponder:

Why is going to an expensive private college so important? Is it really about the quality of education, or is it about the name-brand and the "cocktail party" factor? What programs do in-state colleges have for motivated and talented students? What exactly will we be getting for all the extra money that private colleges charge?

How will paying for an expensive college impact our child in the long run? What effect will student loan debt have on his financial future? If you're thinking about borrowing money, calculate approximately how much the monthly payments will be and for how long, and then look at how that money could be better use. For instance: the average student average monthly payment on undergraduate student debt was $182 in 2002, according to Nellie Mae, with an average term of 20 years. If instead of spending that $182 per month servicing student loans, you invested it in the stock market and achieved a return of 9% per year – a little lower than the historical average – you would have $121,789.73 at the end of that 20 year period – instead of nothing. Let it ride until you're 65, and it'll be around $880,000 -- instead of nothing. And that's based on a graduating debt of $18,900 -- borrow more and those numbers get a lot worse.

Is it really in anyone's best interests for mom and dad to put their own financial futures at risk so Junior can go to one college instead of another?

When you look at it rationally, you'll probably find that the case for private colleges is vastly overstated, and your state university with its single-digit tuition bill will look increasingly appealing.To read more from Zac's 'College on a Dime' series, click here. Be sure to leave a comment if you have a question or topic you'd like him to cover in a future post.